Common Sense Value Investing Tips and Hints

Remember, ALL Value Is Relative. Manias exist from time to time, whether Tulips, Gold, Stocks or Objects d'Art. You only get a bargain, when something is out of favor.
Do NOT Get Greedy Leave Something for the next guy. He has to have a reason to buy what you want to sell. That may mean buying when you don't want to, and Selling when everyone wants what you have.
Enormously Over Valued Or Under Valued Issue May Be That Way FOR A REASON And May Stay That Way For Long Periods Of Time. Grossly undervalued stocks are usually that way because something is Very wrong. Look for Moderate Under Valuation. That way, you can avoid many problems, and wait for the market to recognize the Value you see.
No One Ever Goes Broke Taking A Profit. If you do not monitize your profits they may not be there later. Don't be afraid to take some chips off the table and put them in your pocket.
Do Not Loose A Lot Of Money. If Something you bought goes against you, get out as soon as you see your mistake. Set a percentage of loss, or dollar amount that you are comfortable to walk away from, and get out if things get that bad. There is always another opportunity. Many short term trades have become long term investments. If something goes down Half, It Must DOUBLE To Come Back. Do not try to make up losses dollar for dollar. The markets do not know what you lost and will not sympathize.
Markets Pay For Taking Risk. The less risk, the less reward. Know how much risk you are willing to take, and set the amount of profit you seek. All stocks carry risk. For example, Bonds with maturities longer than five years and Utility stocks can crash when interest rates rise
Do What Makes Things Better, Don't Do What Makes Things Worse. It is better to buy something that is going UP, and Sell something that is going Down. Adding more when something is good, makes it better. More of something bad, usually makes things worse.
Always Keep Some Dry Powder. Dollar Cost Averaging can give you the discipline to buy more shares when something is cheap, and fewer shares when something is expensive. Don't rush to put your money to work. Invest gradually. Always keep some cash on hand for unexpected opportunities or needs.
Buy What You Know. Where you work, or what your study or use, might give you an edge. Remember, there are a lot of smart people out there, but you might see things in your career or at the mall, that others will discover later. Invest in what you know, you will have a better chance to get in and out at the right time.
Don't Trade The Headlines. The market is a discounting mechanism, it is always looking to the future. By the time you read about something in the paper it may be too late to get the benefits.
Buy For A Reason And Know Your Exit Strategy. Before you Buy, decide what would make you sell the stock. Buy when you have a reason. Remember why you bought, and sell it if things change. Don't find a reason to keep a stock for tomorrow, that you wouldn't buy today. Do not worry about leaving money on the table. If your goal is met, that is all you should expect.
Buy Just 12-20 Stocks. You must be able to follow the stocks you invest in, the more stocks you own, the harder it is to monitor what happens to each of them. Diversification can limit losses, but it can also limit gains.
Look For Large Capitalization Stocks With Large And Growing Cash Flows. Most of the time, bigger IS better. Larger companies have more analysts following them and greater visibility, and are less likely to have trouble someone does not see.
Be wary of One Product Companies. Things can change, do not put all your eggs in one basket.
Do Not Chase Stocks Or Fads. Everyone loves a winner, but when something is in great demand, it usually commands a premium. When the hype goes away, so will the premium.
Control Your Emotions. Quick reflexes can be good. But acting without thinking, can lead you down the wrong path. Know when to break the rules, but know the rules.
Quality Common Stocks Have Always Provided The Best Long Term Gains. If a companies earnings' prospects remain constant or improve a much lower price for the stock diminishes risk geometrically.
Leave Trading And Foreign Stocks For Professional Investors, unless you have specific Knowledge Of A Particular Issue.
Don't Buy Or Sell Solely For Tax Considerations. Death And Taxes Are Certainties. If you make money, you have to pay tax. Spend your time thinking about making money. Pay what taxes you must, but make as much money as you can.
Diversify At Bottoms, Consolidate At Tops. Buy more when things are cheap, buy less when things are expensive. Spread out when markets are sold out, limit yourself to the best when markets are expensive.
Nothing Is Perfect. There Is No Magic Bullet. Patient hard work and intelligent application of discipline, will over time, always yield better results than spontaneous impulses.

No product of MB Analysis is intended to constitute the sole source of research or guidance for any investment decision made or contemplated by any investor or investment group. Further information and research beyond those afforded by MB Analysis should be complete before any decision is made by any investor or investors' group to buy, to sell or to hold any equity or debt or any instrument derivative thereof.

Home - Value Groups - Using The Valuation - Value Investing Tips - DJ-30 Valuations